National 4 (Spotlight Weekly)

“It Is Extremely Important To Stay The Course Of Reforms”

— Sultan Hafeez Rahman

Sultan Hafeez Rahman is the Country Director of the Asian Development Bank’s (ADB) Nepal Resident Mission. The ADB has provided total loans worth US$ 2 billion to Nepal till the end of 2003 since it started operations here three decades ago. He took up the reins of the Kathmandu office some six months ago. Last week, he addressed a group of journalists about ADB’s operations in Nepal in the year 2003. He also fielded queries from the media. Excerpts of his remarks:

On The Year That Was

The year passing us by has been both a difficult and eventful one for Nepal. The year began with a sense of optimism and hope but since the ceasefire broke down in August, there is again a sense of insecurity and uncertainty in the country. This is tending to linger. I wish to express ADB’s concern and regret over the sad loss of lives due to the conflict. More than 1000 lives have been lost since the breakdown of ceasefire. Many more have been injured and they have to live with the incapacities for the rest of their lives. Millions of others have been deprived of basic human entitlements. This situation is obviously a matter of concern for us. However, in the last one year we are quite satisfied with the overall progresses of our projects.

On ADB’s New Loans

On our part as a major development partner of Nepal, we have continued to support reforms in all the major sectors of economy. As to our new loans, which we provided this year, we have strengthened our support to governance reforms; we have started supporting decentralization; we are supporting reforms in rural as well as urban water supply and sanitation and we are promoting reforms to improve the environment in which the private sector can become much more driving institutions.

On Reforms

Through our loans we have also been supporting reforms in agriculture, energy, transport, water resources and corporate financial governance in both public and private. And we fell that it is extremely important to stay the course of reforms. Many reforms have been initiated in recent years. The government has been pro-active in initiating and undertaking these reforms. We wish that these reforms will be continued and that the country will continue to find the way to reform itself in such a way that the aspirations of its people are met.

On Regional Assistance

Through our regional technical assistances, which is outside the assistance we provide through our lending and non-lending program, we have been supporting the South Asia sub-regional economic cooperation arrangement. Under this we have been supporting tourism and transport, in Nepal. The other three countries, apart from Nepal, which are receiving this assistance include Bhutan, Bangladesh and India. We have also provided a very important regional technical assistance in the area of SARS prevention and control.

On Macro Economic Situation

Looking at the macro-economic indicators of Nepal, the macro-economic environment has improved since the fiscal year 2003. We are now into fiscal year 2004. The first half of this fiscal year has now been completed. And it seems that the macro-economic situation has improved. It also appears that with the strong rebound in agricultural growth, both the overall GDP growth rate forecast by the government will be realized, which is over 4 percent and that the inflation may come down because of the large increase in agricultural production. The agricultural sector will grow by 3 – 3.5 percent whereas the non-agricultural sector will grow by around 5 percent. While we noted that the fiscal deficit had gone down, which is good for macro-economic stability, we also noted that it is not entirely because of the increase in revenue collection. A large part of it is due to sharp slowdown in development expenditure. This is a cause of concern for us. We hope that this situation will improve; if it does not then it will be extremely difficult to sustain the sort of modest economic recovery that we are experiencing at the moment.

On ADB’s Lending Programs

Our lending programs this year have been achieved. We have delivered assistance worth US$ 96 million to Nepal and these have been provided in the form of four highly concessional projects. There were eight Technical Assistance (TA) grants worth US$ 4.17 million that were extended to Nepal. The four loans include Public Sector Management Program worth US$ 35 million; Community-based Water Supply and Sanitation Project worth US$ 24 million; Kathmandu Valley Water Services Sector Development Program worth US$ 15 million; and Commercial Livestock Development Project worth US$ 20 million.

On Development Assistance

I don’t think the ADB takes any pride in the levels of lending that we achieve in Nepal. We are concerned about the impact that we have from our development projects. The benefit that we provide is the most important aspect. Of course, Nepal needs development assistance and as a major development partner, which has long historic relations with Nepal, we are always committed to provide the assistance that Nepal requires. We are very forthcoming in this assistance. I can assure you that the ADB will continue to remain committed on its assistance level. But we are very focused on our development objectives in each of the projects and the overall assistance that we provide both through lending and through non-lending. The technical assistance that we provide is fully in the form of grant. It is also extremely important in trying to bring forth the sort of development impact that we need. As I talk about development impact, the most important development impact was the sustained reduction in the poverty and as you know, if you look at our programs, they are completely focused at reducing poverty in Nepal.

On Conflict

I think that since the breakdown of ceasefire, we all know that across the country the hostilities have increased and the overall situation has deteriorated. The ADB would like to reiterate that peace and stability is the foremost priority of Nepal and without them it will be impossible to achieve sustained poverty reduction in the coming years.

On Human Rights Situation

The international community has expressed concern and we are aware of these concerns. The thing is how we view our assistance to Nepal. The way we view our assistance to Nepal in a situation of conflict that it is something that will help to win the peace. We feel that there is room to deliver the assistance in such a way that those affected by the conflict and those who are poor will benefit. As long as we can deliver such assistance, we will remain committed. However, if there is a situation where we are unable to deliver the assistance because of the security situation, then we will have to consider.

On Effect of Conflict on ADB Projects

I would say that we have been fortunate. Three of our projects – out of 20 ongoing projects – have been quite affected. By quite affected, I mean that at least 20 percent of the project activities have slowed down. These three projects include Rural Micro-finance, Crop Diversification and Melamchi Water Supply project. Beyond that we have been fortunate till now.

On Economic Cost of Conflict

I have been trying to address this concern from the time I arrived here. Apart from us, there are a number of other agencies, who are looking into it – UNDP being one of them. The government itself has some estimates. Obviously, the government is in a better position to disclose it. We are still grappling with this. I think it will take quite sometime before we get a concrete figure.

On Lack of Local Government

Obviously, the lack of local government is a concern for us. It has been a concern for sometime now. But we are trying to design our projects in order to be able to adapt better. We hope to increasingly work directly with the communities, of course through local government functionaries. We hope that at some stage the situation will improve.

On Country Strategy

We have started what is a major event for us the Country Strategy and Program Exercise. This is a long exercise, which will take more than a year to complete. This is being done in Nepal under the new processes, which were instituted in the ADB in the year 2000. For the first time we are doing a full country strategy and program. Earlier on we used to have a Country Operational Strategy and that was last done for Nepal in 1999. Meanwhile, there has been major change in the way we prepare our strategy. The change is that we now undertake an in-depth poverty analysis of the country and we hold consultations at the grass-root, local level and with other focal groups.